The Sacramento Business Review says it expects businesses to stop holding their profits and start reinvesting them.
Sanjay Varshnay is Dean of Business at Sac State and co-authored the report. He says businesses have been holding on to their money until calm is restored in a number of areas.
VARSHNAY: "The uncertainty in the regulatory environment, the policy making issues, the tax issues, and just the general political climate and the uncertainty that it has created, including the current conversations going on with debt ceiling for example, are really making the private sector very very reluctant"
Varshnay says the banks continue to be stingy with their money and there has been a shortage of credit-worthy borrowers who want to take any kind of financial risk.
The semi-annual publication says it may take the region seven-to-ten years to recover the 110 thousand jobs lost in this recession.
Varshnay says other states are benefiting from California's poor business climate.
"We keep seeing businesses wanting to move out of California. In fact, last week, you saw Jelly Belly from Fairfield wanting to move out to Nevada"
On the positive side, the report says the second half of 2011 should bring faster economic growth with companies starting to re-invest their profits, which would lead to more jobs.
Whether it will be locals who take those jobs, is in question. The report says there is a "skills mismatch between job-seekers and vacancies."